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TREASURY DEPARTMENT WASHINGTON January 16, 1940 Dear Mr. Eccles: May I acknowledge receipt of the original and six copies of the memorandum prepared by the Federal Reserve covering the income certificate plan, together with a letter of transmittal from you to the President. Attached yon will find a copy of the memorandum prepared for the President "by the Treasury Department on the same stibject. The original! of these memoranda and your letter of transrcittal were forwarded to Dr. Currie on January 13th. Sincerely yours, Honorable Marriner S. Eccles, Chairman, Federal Reserve System, Washington, r. C. FOR f U IDEBTj #i>.fury N p i f t M i t IMM analysed the Certificate Plan for i H P f l t t f nsrity ^nT«tnt» to viieat, cotton iftl rl©» gro *•*>?*, flnanatd otitnidiii th# Budgtt by p f t i f l n - tsT«8 vlthout th#» fh© 0#partm©nt oonolude* th»t th« nlun Is an thoa of financing agrleulturftl b»n for th» follcving fl«e*l reasons: (I) fhi eoet of t)i« Plan w l l f a l l on th« of br>sio naetsiiti®!!, burdtnim* thost with IttsWMMI mort th^n tfcSjj vlth larg^ inaos#i. The tajrea iar^oe^d VWli be «v#n mora r«^r*e«lvft than any of the ppitMl F»d«r#?l »al«* and I9HH taxes* Th«y veuld b# lspoaed on tha weight of tU# breie eommodlt^ reg^rdl«»« of th« prio* of tint finul nroduot to the oonsusur* In tome iMMM t2i<? ^ror>o«ed tax m t # i t#otild bi^ higher than MNM of th# forsaur nreoesding ta?rta. Mi ^ajnwntff umtHF tm Plan «Wll4l b« m t f to about three million vh«nt# ©; tton and rie# ^roduo«rs# »om# of %feiofi ttw r e a t l w f«WtaStial inc , at th# of another f***9 ©misprising four million farm families, more than tw«afcy-*wo million non~f*.rai familiar MMI f*erer&l million riAglA I l i l l i f t n i t ^ and including the unesnleyed, this r e l i e f reel^lentt and •any others with very IM tneomet* The ftxclttftioft i f Mtfl Imrsortant tax MM txIMM I t a i i fron tiw? Budgtt ^^«ia. limit th« 9M of fiMMl pel ley air J?.B Instrument of control* Furthermore, I t > impair th» of the Budgot In fieenl piattMMg * w ^ mamrngtm^nt th« i»«^ of v>*rloai© Congr«««loo«l r«vi«v sorutiny w«ld further h^adiesn C-oY<srnT«#nt in the ^llooatlon of it® fcr^nrtttiir** aacm^r the (3) fht adoption of th# Plan o«naot b# counted on to r*fiucf ^pyroprlatIWII vSMta th« Budget ev«n though I t v**X4 add large »p#»dltyr*« outfttde th# Budget* fhe N ; rtsient of AgrleulfMNl ixa« lt«e>.f e^^r#ee«d th# «3cthat reductions la nmrlty n«y«ente within the Budget ^o«M o# offset b j inarefteed aporoprlfitione for the diet>o«Al if surt>lup« The heavy proce««lnf taxee might well reduce eubfttentl^lly the coneuss-otlon of the eomodltiet* aggravating the agricultural «yrr>lus , produo «rs of e©iaao<lltl«fc notftMNNNrilby lats w < M IMMHUMHI i n s i s t »ot only on HMA9 t f W I i i but also ou a d d l t t o a u l p^fMMi t i c? tr*»5i os an tgita! ba»i« with nd)*atf cotton An a n a l y s i s of thsus Mil oth#r a t n t e t a of Gsrtlf l e n t s rim I s contained In tri« Att^ohsd (Signed) RB/affln H. Morgenthau, Jr.
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